Is Florida a Good Place for Real Estate investment?

Question

Hi,

I am interested to real estate investments in Florida. But I am very concerned that Florida gets frequent floods and hurricanes which ends up in huge property damages.

I am sure there are other real estate investors who would have faced these challenges and concerns. Any guidance is appreciated !

Also, does Florida have landlord friendly laws like in Texas?

Diya L. · Answer

For what it's worth - we buy hotels/STRs and were considering FL to be one of our target markets and have decided in the last 2 months to stay from FL for at least a few more months, if not permanently.The reason? Insurance. The bite-sized version of the information below is basically that FL insurance companies are exiting FL or filing for bankruptcy due to fraudulent insurance claims (70% of which originate from FL across the USA). FL insurance companies are also underfunded relative to how much reserves they are supposed to carry and rely on European re-insurance companies. [I don't really know what happens if a claim happens and the European re-insurance company refuses to pay - there is no US law that protects you in this case, and the FL insurance company will just have to file for bankruptcy.] The FL govt has now become the largest insurer in the state even though the state program was supposed to be the last back up plan. To expand the state-funded program further would be to go against the state's politics of smaller govt intervention. LINKS:

https://news.fiu.edu/2022/the-...https://www.bankrate.com/insur...This plus the hurricanes/rising sea levels/global warming (or at least an increase in hurricanes in the future, if you don't believe in global warming), the fact that FL real estate prices dropped 30-40% last recession, and the fact that FL real estate has become frothy from pandemic influx of buyers... feels like the perfect storm for a lot of upcoming pain points for FL real estate investors.

Nicolas A. Scaron · Answer

Shyam,

That can be a loaded question. Florida as a whole offers great opportunities that are dependent on various factors such as location and the financial aspect affecting returns. As for the laws, they are extremely fair, I would say landlord friendly. For further guidance on this, check: https://www.fdacs.gov/Consumer...

Homeowner and flood insurance are severely impacted by location, but now more so due to the lack of competition among the remaining companies offering these policies. As for floods, look at  https://www.fema.gov/flood-map... for flood maps, this will let you know if a property is within the flood zone and know that you'll be paying a higher price for this policy. Note: A lot of people don't know this, but if the edge of a high-risk flood zone runs between the property, you can contest the flood zone. They call it the "inadvertent inclusions." Can be a lengthy process, but worth the savings if you win.

Paul De Luca · Answer

I have the same concerns about investing there with the hurricanes and flooding. Not to mention that seemingly everyone has been moving and investing there (STRs in particular).

Khemraj Sarju Jr. · Answer

I agree with Luis. These properties almost always DSCR amazing for our clients as well.

Luis Maqueira · Answer

Is simple the market profits is driven by supply and demand.

An Florida has the highest Demand from Latin America, America, Canada end Europe..etc

If you want to sale or rents do the research.... Always there is something happing in Miami from soccer, fashion, Boat, Formula 1, the new silicon valley.

Good Luck,

Marshall Leipprandt · Answer

@Shyam Kumar I thought a lot about hurricanes/flood risks before buying in Florida, but ultimately ended up moving forward because I realized that no matter where I buy real estate in the US, every market has its issues. It really comes down to which types of risks you are willing to accept (tropical storms, tornados, earthquakes, droughts, snow storms, etc.). Bake the risks into your analysis.

As others have mentioned, FL is generally more friendly towards landlords but may depend on the exact area that you are in. A lot of this risk, independent of where you buy, comes down to the type of property you buy and how you screen tenants. If you're buying in strong rental areas with a large tenant pool and a strong economy, chances are you'll have more qualified tenant prospects and can minimize the risk of putting yourself in a situation where you'll be relying on the landlord laws as much. Granted, great tenants on paper can still be terrible, but in general this rule applies.

Lastly, Florida is the third largest state in the US by population, over 21 million I believe. That means that there are A LOT of other landlords and owners who have been asking the questions you are and have proven that FL is a worthy market for investment.

Eliott Elias · Answer

Texas is better

Taylor L. · Answer

The flood & hurricane risk is not the same everywhere in the state of FL. Some areas are higher than others. It's important to note that insurance rates have gone up in Florida, so your insurance costs will be higher there compared with most other areas.

Nathan Gesner · Answer

Landlord-Tenant laws in Florida are fair.

There may be a higher number of natural disasters than other areas, but people are still doing very well with investments.

Is Florida a Good Place for Real Estate investment?

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